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18 Aug 2017 1:13:06pm

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SAY'S LAW.

Whilst Adam Smith believed that deregulation would create greater fairness in the distribution of wealth, he urged the avoidance of monopolies, a big ask without regulation. He also wrote “Wealth of Nations” when there was no model that he could point to, just autocracies. For a much better appraisal of deregulation turn to Say.

Say was a French economist who proposed a Law which is so simple it almost beggars belief. Get a pencil and draw two equal sized rectangles spaced a bit apart from each other, write in one CONSUMER and in the other one PRODUCER. Now draw an arrow from the consumer box to the producer box and write above it CONSUMPTION and one the other way from the producer to the consumer and call it WAGES. The consumer works for the producer, gets wages from the producer, with which he or she purchases the goods made by the producer.. Now let’s assume that every country in the world lowers tariffs in the name of free markets and its obvious that the country that can produce those goods the cheapest (China and now India) will have the advantage and out compete everybody else. China does it because it has such a low wage rate, thereby forcing other countries to lower their wages to compete. Okay now draw a smaller box in the consumer box and its evident that in lowering the aggregate global wages bill there there is not enough money to purchase the global aggregate industrial output of goods and services. Now shade in the space between the little box and the big box and call it credit or better still debt.

You get the picture The only way you can lower wages to compete on export markets whilst maintaining local consumer demand is to allow the consumer to go deeper and deeper into debt. Austerities as the answer? Then take away payment for overtime. Lower wages plus force workers into deeper debt that becomes impossible to pay off and you have a very stressed out and belligerent workforce. If you lower wages lower than they already are, whilst making savage cuts to the public sector workforce, cut pensions, etc. you simply further depress an economy and reduce further it’s chances of growing and paying of its debt. It cannot work, it’s impossible and a perfect formula for a breakdown in law and order and eventually civil war EVEN in the US.

SPECULATION. Speculation produces no real wealth. It merely redistributes wealth from the poor to the rich via the Hood Robin effect, i.e. the crumbs jump up off the floor onto the table, thereby starving the dogs down below. The little speculator loses out to the big one, the small taxpayer increasingly subsidises the rich, wages go down whilst ceo’s remuneration goes up. So to keep it simple for now the only way out is that the rich have to pour money into that shaded area in the CONSUMERS box or else the entire banking system goes down and the rich go down with it. A bad run on a big bank starts a chain reaction?

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